Hanjin Aims to Sell More Than Half Its Ships
17 September 2016 - 2:50AM
Dow Jones News
Debt-ridden Hanjin Shipping Co. is working on a restructuring
plan that calls for the drastic reduction of its fleet and
returning the vast majority of the ships it charters to their
owners, according to people with direct knowledge of the
matter.
Despite the efforts, these people say the most likely scenario
is still that the Korean operator— the world's seventh-biggest in
terms of capacity—will be liquidated, marking one of the shipping
industry's biggest failures.
Hanjin filed for bankruptcy protection last month. The South
Korean government has strongly indicated it has no plans to bail
out the company.
A Korean court will decide in December whether to accept the
plan or let the company go under, according to court officials in
Seoul.
One person with knowledge of Hanjin's efforts to restructure
said the operator is considering a number of scenarios but focusing
on one "that involves Hanjin keeping up to 15 of its 37 ships, and
giving back to owners almost all of the 61 chartered vessels."
Under that scenario, which is subject to approval by the bankruptcy
court, "Hanjin will emerge as a small regional operator in Asia
that will move a small part of Korea's exports," the person
said.
Hanjin didn't return calls for comment.
Since Hanjin filed for bankruptcy in Korea in late August,
dozens of ships have been denied access to ports around the world
due to uncertainty about who would pay docking fees,
container-storage and unloading bills. Those ships are carrying
half a million containers and cargo valued at more than $14
billion. Some of them have been seized by the company's
creditors.
The Korean carrier moves 3% of containers globally and up to 10%
of those shipped between Asia and Europe. Some 25,000 containers
cross the Pacific daily on Hanjin ships.
About 95% of the world's manufactured goods—from designer
dresses to laptops—are moved in containers.The disruption in the
supply chain comes as retailers in the U.S. and Europe are stocking
their shelves for the holiday season.
The company confirmed this week that it had returned five of its
chartered vessels to their owners. A Korean government statement on
Thursday said 73 vessels were still at sea, of which 37 were being
told to return to Korea. The rest drifted near ports on fears they
would be seized by creditors.
Hanjin's main charterers, including Danaos Corp., Navios
Maritime Partners LP and Seaspan Corp. that have a combined
exposure of more than $1 billion to Hanjin, were hoping for a
last-minute intervention by the South Korean government that would
allow Hanjin to honor its vessel leasing commitments. That looks
less and less likely.
"Hanjin now has two alternatives: ether to drastically downsize
or to liquidate," said Iraklis Prokopakis, Danaos' chief operating
officer. "We have eight ships chartered to Hanjin and five will be
returned. The other three still have cargo on them so I don't know
what will happen."
Danaos has a $560 million exposure to Hanjin.
Mr. Prokopakis said the determining factor at the December court
hearing will be whether Hanjin has enough cash to continue
operating, even at a much smaller scale.
But with Hanjin's main creditor, state-run Korean Development
Bank, showing no intention to pump more cash into the ailing
carrier, few executives in the shipping industry believe it will
manage to stay above water.
"Any cash Hanjin still has will go to get its ships safely to
ports and unload the cargo," said Lars Jensen, chief executive of
Copenhagen-based SeaIntelligence Consulting. "I expect them to
start selling their own ships when the legal issues with creditors
are settled."
Selling the ships won't be easy. The majority of Hanjin's fleet
are 'Panamaxes' that can carry fewer than 10,000 containers. Such
vessels are fast becoming outdated in the wake of the widening of
the Panama Canal earlier this year. That expansion allows ships
moving 12,000 containers or more to pass through the isthmus.
"So their only true valuable assets are four 13,000-container
ships," Mr. Jensen said. Hanjin may try to hang on to them hoping
to become part of an alliance, when the mess clears up, he said,
"but more likely they may sell them as customers won't want any of
their cargo on Hanjin ships. The trust is gone."
The Korean government said this week it is asking courts to
protect Hanjin ships from being seized in Spain, Germany, the
Netherlands, and Italy. It plans to do the same next week in
countries including Australia, India and the United Arab Emirates.
Such a legal protection is already in place in Korea, the U.S.,
Japan, the U.K. and Singapore, it says.
Kwanwoo Jun in Seoul contributed to this article.
(END) Dow Jones Newswires
September 16, 2016 12:35 ET (16:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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